This semester, you moved to an apartment eight miles from campus and will commute to classes three times a week. This decision will let you achieve significant savings. However, you have not yet decided whether to use your car or ride the bus to campus. You estimate the following costs for each alternative:

Driving Your Car
• Monthly payments on your car of $220
• Maintenance expenses of $37 per month (This cost is an average and reflects oil changes, car washes, and lubricants.)
• University parking fees of $150 per semester (four months)
• You would spend approximately $60 in gasoline per month. You estimate a total of 600 miles driven every month, which includes approximately 200 miles per month for three trips per week to campus (approximately 12 round trips per month).

Riding the Bus
• You have two alternatives regarding the purchase of bus tickets:
1. You may buy a semester ticket with unlimited rides for $225 per semester (Bus A).
2. You may purchase each ticket individually for $2 each way (Bus B).
• If you decide to buy the semester bus pass, you estimate that you will ride the bus quite often and replace approximately 200 miles from your car’s monthly allowance of 600 miles.

A. Based only on cost, which alternative would you choose? Show your calculations. Assume that a semester lasts four months and that you will always ride the bus to campus if you choose one of the bus options.
B. Discuss reasons why your estimate in part (A) might turn out to be incorrect.
C. List factors that could affect your decision but that cannot be valued in dollars.
D. Suppose that you had never ridden a bus. Would you be biased against the bus option? Explain.

  • CreatedJanuary 26, 2015
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